Strong iPad Sales Rescue Apple Amid Declining iPhone Revenue

Apple reported better-than-expected third-quarter financials on Thursday, with overall revenue increasing by 5%. The standout performer was the iPad, which saw significant growth, jumping from $5.8 billion to $7.2 billion year-over-year. This surge in tablet sales helped offset the decline in iPhone revenue, which dropped from $39.7 billion to $39.3 billion compared to the previous year.

Despite the dip, the iPhone remains Apple’s most crucial product category, followed by its services segment, which includes iCloud, Apple TV+, and Apple Music. This category showed impressive growth, rising from $21.2 billion to $24.2 billion year-over-year.

The iPhone's slowdown is largely due to a decline in the Greater China region, where revenue fell from $15.8 billion to $14.7 billion for the quarter. According to Canalys, iPhone sales in China decreased by 6.7%, from 10.4 million to 9.7 million units.

The decline in Apple's third-largest market impacted its overall performance. In response, Apple began offering significant iPhone discounts in China in May, leading to a 40% increase in sales that month compared to the previous year.

Meanwhile, Huawei, previously hindered by U.S. sanctions, has made a strong comeback in China by developing its own chips and an Android alternative. Canalys reported a 41% year-over-year growth for Huawei, which surpassed Apple's sales in China, with 10.6 million units sold in the quarter.

This marks the second consecutive quarterly decline in global iPhone sales, increasing pressure on Apple's AI strategy, unveiled at WWDC in June.

CEO Tim Cook told CNBC that Apple has redirected significant resources toward AI development. "We’ve redeployed a lot of people onto AI projects," Cook said. "We have a hybrid approach to data centers, combining our own infrastructure with partners’ facilities."

Some of these AI resources were reportedly reassigned after Apple paused its Project Titan autonomous electric car initiative.